The CBRC asked banks to conduct a new round of stress tests

Beijing time August 5 Morning News, Bloomberg and other foreign media reports said, China's Banking Regulatory Commission (CBRC) may have asked lenders to carry out a new "stress test" last month, according to a source familiar with the matter, and the test may have been more stringent than before. The regulator has asked banks to take the worst-case scenario into account in this round of "stress tests", that is, where house prices are likely to fall by about half in those areas where prices have gone up too much, said the person who declined to be named.　　In a number of "stress tests" conducted over the past year, the CBRC has asked banks to assume a maximum decline of 30% per cent in house prices. Industry insiders point out that the new hypothetical scenario may indicate a concern that a record $1.4 trillion trillion of new lending last year has played a role in stimulating the housing bubble and could lead to a sharp rise in default debt. Since mid-April, regulators have tightened property lending rules and hit speculative activity in the market.　　Real estate prices in China in the first quarter of this year surged 68% from a year earlier, according to estimates by Knight Frank, a London real estate consultancy. Economists say a deep fall in the housing market could lead to a further slowdown in China's economic growth. China's economy grew by 10.3% in the second quarter, less than certain market expectations. Still, China remains the world's fastest-growing major economy.　　Fears that China's economic growth could be slowed by a slowdown in the property market have led to a fall in early Wednesday stocks. In a statement issued on July 20, the CBRC said that banks should "continue to deepen" the "stress tests" on real estate and related industries, citing a statement by the Chairman of the CBRC at a meeting of regulators and bank leaders, but did not disclose specifics.　　CBRC officials have yet to comment on the news.　　According to sources, the results of the previous "stress tests" show that if house prices fall by 30% and lending rates rise by 108 basis points, the proportion of non-performing real estate loans in China will rise by 2.2% in total loans, in which case the pre-tax profit of Chinese banks will fall by 20%.　　Measures to cool property prices in China include raising the best mortgage rates, raising the down payment ratio for a second home, and suspending loans to buy a third home.　　Real estate prices in 70 cities fell by 0.1% in June, up 11.4% from a year earlier, a year-on-year increase that has slipped for the second consecutive month, the National Bureau of Statistics reported on July 12.　　Bank of China, Lihui May 27, said the bank's non-performing loan rate would rise by 1.2% per cent, based on the worst-case scenario set by the recent "stress test". Last year's record lending volume in the Chinese market and the consequent surge in house prices have sparked fears that the housing bubble is forming, which couldIndustry poses a threat.　　According to the data, real estate stocks in the Shanghai Composite Index have been the worst performers so far this year, with an average decline of 21%. "There is a perception in the real estate industry that the banks and the real estate market cannot withstand 25%-30% per cent decline in house prices," said Nicholas Consonery, an Asian expert at the Eurasia Group, a consulting firm in Washington. However, Consonali also pointed out that the Chinese government probably did not believe that house prices would fall by about half, but only wanted to "show the market that China's banking sector is still healthy even in the event of a sharp fall in house prices". Wenwu)